Battle Lines Drawn in the MS Market

For years, patients suffering from multiple sclerosis had to endure injection therapies to stave off the horrible disease. Oral medications have finally emerged from development recently, and it turns out the competition is heating up fast: Results arrived on two major clinical trials for Biogen Idec's (NYS: BIIB) own oral MS drug, BG-12, and the data looks rock-solid. With the MS market suddenly red-hot, will Biogen's latest success propel the company to higher heights?

Mopping up the competitionBiogen's two phase 3 trials for BG-12 came out in Wednesday's New England Journal of Medicine with promising results. The two trials demonstrated strong efficacy for BG-12, with chronic relapses falling 44% to 51% at the two-year mark. Given that drugs currently used to combat MS relapses typically demonstrate only a 30% improvement, BG-12's success looks sharp.

While the FDA won't rule on BG-12's approval until later in the year, Biogen's drug looks to become just the third oral medication for MS on the market. Sanofi's (NYS: SNY) Aubagio received the green light from the FDA earlier this month, following Novartis' (NYS: NVS) Gilenya, the first oral MS treatment launched in 2010.

Unfortunately for Biogen's two competitors, their drugs come with serious questions over efficacy and side effects. Gilenya has caused numerous headaches for Novartis, with the FDA issuing a restrictive label for the drug after a patient died soon after beginning treatment. While the connections between the death and the drug were unclear, the fact that Gilenya also can slow patient heart rates -- and that patients are recommended to stay in a hospital for six hours after the first dose, although a standard doctor's office can also carry out monitoring -- aren't helping Novartis' PR department.

Concerns and answersIronically, the hurdles hit by these two drugs -- Gilenya in particular -- could come back to haunt Biogen. With doctors used to effective injection medications for MS, the problems of the past could make individual practitioners hesitant to dole out a third oral treatment. National MS Society Chief Research Officer Timothy Coetzee cautioned BG-12's spread on this very issue, stating, "My guess is that the injectables will remain an important treatment option." He warned that a wide-scale replacement of injection treatments with oral drugs is still up in the air.

Still, BG-12 is a potent drug. The twice-daily treatment in one clinical trial proved to reduce new MS-linked brain lesions by 71%. The drug also lacks the problematic side effects of Gilenya, with the most common problems being digestive issues such as abdominal pain and diarrhea. Such side effects also diminished in number in the clinical trials after the first treatment month.

Additionally, Biogen has plenty of ways to combat MS on the market already. Its MS injection therapy developed jointly with Elan (NYS: ELN) , Tysabri, is prescribed for first-line MS treatment in Europe. Tysabri still recorded 69,000 patients as of July and grew year-over-year annual revenue by more than 10% in 2011 for Biogen.

BG-12's U.S. patents won't expire until 2019 at the earliest, so if it's approved, Biogen will have plenty of time to make inroads on a lucrative and growing MS market. Biogen further estimates that BG-12 would hold eight years of data exclusivity and an additional two years of market exclusivity in the European Union, effectively stringing out maximum sales in the Western world's most powerful consumer markets until the next decade.

Biogen's steady stream of optimismBiogen's still a solid company with a strong financial future on top of all that. It boasts a steady pipeline of 12 drugs and therapies in phase 2 trials or later, including BG-12. The company's best-selling drug, Avonex, took in more than 50% of the company's revenues, and Biogen holds exclusive rights on the drug until 2026.

The strong majority of Biogen's $5 billion in annual revenues stemmed from MS treatments in 2011 -- a market that will reward Biogen and its shareholders even more as it grows from a current $9.6 billion market last year to an estimated $14 billion by 2015, according to JPMorgan Chase projections. If medical professionals sign on to the prescription of oral MS treatments, it's common sense to think that patients would go for the hassle-free therapies over painful injections -- allowing BG-12 and Biogen to further tighten the company's grip on this market.

Don't bet the farm on Biogen before the FDA rules on BG-12's approval, but for right now, everything's looking optimistic for this MS drug. It's up for debate whether BG-12 will hit superstar status, but with Gilenya already selling reasonably well and projections for Aubagio high, BG-12 could take the lead in a promising market. Biogen may be trading at all-time highs, but the coming returns could soundly trump what we've seen so far from this booming biotech stock.

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